“We’re getting new money at quarter end, we’re seeing a lot of speculative issues leading the way, particularly small-cap, and at the same time, short interest in large cap is moving higher,” Ablin said Monday. “So, it could be a lot of hedge funds in today.”

He said difficulties in the sub-prime mortgage sector are still unfolding, and many adjustable rate mortgages haven’t yet been re-pegged to a higher rate.

“You certainly have to worry about it on the consumer side,” Ablin said. “Clearly, if people are failing to make payments on their homes, chances are they’ve already failed to make payments on their cars, credit cards and other expenses. Then (comes) the (fallout) into the hedge fund space (like) Bear Stearns. Is it an isolated event or is it a broader contagion?”

Ablin said he likes healthcare stocks because valuations are cheap.

“Price-to-cash-flow is the cheapest it’s been in about 15 years,” he said.

Thomas Melcher, chief investment officer at Hawthorn, PNC’s unit for ultra high net worth clients, said he’s not worried about interest rates at current levels.

“In the U.S., the fact that valuations in the large-cap stocks are still somewhat attractive, I think is one factor that could propel the market higher,” Melcher said. “Second, even though the market is slightly disappointed that the Fed appears it is not going to be lowering interest rates before year’s end, the 10-year (bond) is back over 5%, the Fed is holding steady at 5.25%, and I don’t view interest rates as being competitive with stocks at this level. The third thing we have going for us is in the third year of a presidential term, typically the market turns in relatively good results.”